LONDON — Austerity is biting top management at Burberry, which is in the thick of a cost-cutting and restructuring drive aimed at delivering at least 100 million pounds, or $129 million, in annualized savings by fiscal 2018-19, as the company reshapes itself in challenging times.
According to the annual general report published earlier this week, chief creative and chief executive officer Christopher Bailey waived his bonus for the second year running, although he still stands to collect about 10.5 million pounds, or $13.6 million when, part of a 1 million chunk of shares that he was awarded in 2013 vests next month.
Bailey turned down his bonus “in light of the underlying financial performance of the business for the year.” Burberry said the board “welcomed” and agreed with his decision.
The annual report also pointed out that adjusted profit before tax for the year was “just below” the bonus target resulting in a potential bonus payment of 46 percent maximum.
In the 2016-17 fiscal year, Bailey’s salary of 1.1 million pounds, or $1.4 million, was flat on the previous year. He received benefits and allowances of 469,000 pounds, or $614,390; 330,000 pounds, or $432,300, in pension contributions, and 240,000 pounds, or $314,400, as part of a share plan.
In addition, he scooped an exceptional share award of 1.4 million pounds, or $1.8 million, as part of a performance-linked bonus agreed in 2014, when he took on the added role of ceo. That 1.4 million pound payout represents a fraction of the share tranche that he received.
All figures have been converted at average exchange rates for the periods to which they refer.
Marco Gobbetti, who will take over the ceo position in July, will receive a similar base pay and salary package to Bailey’s, in addition to 4.3 million pounds, or $5.6 million, in share options, equal to the sum he was forced to forfeit on leaving his role as ceo of Céline, a division of LVMH Moët Hennessy Louis Vuitton.
While Bailey may have chosen to waive his bonus, other executives — and new hires — will likely see their perks automatically slashed in the current fiscal year, which ends in March 2018.
According to the report, Burberry wants to align the “long-term interests of executives with those of shareholders” and is therefore proposing a change to the remuneration policy. The company is recommending a reduction in the annual bonus policy maximum from 225 percent to 200 percent of salary, and also wants to slash the executive share plan awards from 400 percent to 325 percent of salary at the “normal” level, and from 600 percent to 375 percent at the “exceptional” level.
It is also proposing cuts to the maximum annual salary increase from 15 to 10 percent, and maximum relocation benefits that may be paid to current executive directors from 250,000 pounds, or $322,680 to 200,000 pounds, or $258,144.
Burberry is also looking to trim pension contributions from 30 to 20 percent of salary for new, external executive director appointments, and remove “sign on” bonus or share awards, other than buy-outs, on recruitment.
Goodbye, golden hellos.
The measures will be put to a shareholder vote on July 13 during the AGM in London.
As reported, profits for fiscal 2016-17, which ended on March 31, fell 7.3 percent to 286.8 million pounds, or $375.7 million, in line with analysts’ expectations, while revenue was down 10.4 percent on a reported basis, and 2 percent on an underlying one to 2.77 billion pounds, or $3.63 billion.
The year had been a tough one for Burberry, which in 2016 laid out a restructuring and cost-savings plan aimed at reshaping the company for a future of slower growth in fashion and luxury goods and a digitally engaged, want-it-now customer base.
All the austerity has clearly not fazed Bailey, who remains committed to Burberry, and said last month he cannot wait to get down to creative business and work alongside Gobbetti.
“I plan to redouble my focus on design, product and telling stories,” said Bailey, who will continue to hold the joint role of chief creative officer and ceo until July 4, when he’ll also take on the new title of president.
He said he had “huge optimism” about the future, and that while the company was progressing on a variety of fronts, there was much more work to be done.
Burberry shares, which had climbed 0.7 percent earlier in the day, closed down 0.4 percent to 17.36 pounds on Wednesday.